Presentation to the Joint Meeting of Portfolio and Select Committees on Public Enterprises
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Presentation to the Joint Meeting of Portfolio and Select Committees on Public Enterprises. Presenter: Dr Sivi Gounden - DG Date : 13 November 2002. Restructuring of State Owned Enterprises 2002. Outline of Presentation. Restructuring Objectives Proceeds and SOE performance

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Presentation to the joint meeting of portfolio and select committees on public enterprises

Presentation to the Joint Meeting of Portfolio and Select Committees on Public Enterprises

Presenter: Dr Sivi Gounden - DG

Date: 13 November 2002

Restructuring of State Owned Enterprises 2002


Outline of presentation

Outline of Presentation

  • Restructuring Objectives

  • Proceeds and SOE performance

  • Progress on SOE restructuring

  • Addressing concerns of Organized Labour


Social and economic impact of restructuring

Internal to the firm, industry or sector

Broader economic impacts

Social impacts

Social and Economic Impact of Restructuring

Enhancing efficiency and effectiveness of state enterprises

Reducing the public sector borrowing requirement

Ensuring wider participation in the South African economy

Accessing globally competitive technology

Attracting foreign direct investment and portfolio inflows

Mitigating possible negative social impacts arising from restructuring

Creating effective market structures in the sectors currently dominated by state owned enterprises

Financing growth and the requirements for industrial competitiveness

Promote sustainable employment, either directly or indirectly, through improvements in the economy

Mobilising private sector capital and expertise


Proceeds from restructuring

Proceeds from Restructuring

  • Since 1997 – proceeds to the fiscus - R20 billion

  • For the period (2000 – 2001) – proceeds to the fiscus - R7.5 billion (SASRIA & MCell)

  • National Treasury projection for the current year is R12 billion.

    • Telkom IPO

    • Safcol Proceeds

    • Alexkor

    • Apron Services

    • Air Chefs

    • Aventura Resorts


Total proceeds from restructuring endeavours

Total Proceeds from Restructuring endeavours


Soe borrowings as a percentage of sa s external debt

SOE borrowings as a percentage of SA’s External debt


Presentation to the joint meeting of portfolio and select committees on public enterprises

Restructuring of SOEs (Progress Update)

  • Defence

  • Transport

  • Energy

  • Telecommunications

  • Forestry

  • Mining

  • Hotels and Leisure


Presentation to the joint meeting of portfolio and select committees on public enterprises

Defence Sector

  • Denel (Pty) Ltd

    • Cabinet approved the acquisition by BAE Systems of 30% of Denel Aerospace and Ordnance for R375 million.

    • Government will retain its 70% share in the interim.

    • We will explore the options for the ESOP, BEE and other SEP’s including a possible IPO down the line.

    • Government will also hold a “golden share” in respect of setting clearly defined issues that pertain to our national security as well as other issues such as size and extent of future shareholding.

    • Negotiations ongoing with BAE Systems


Presentation to the joint meeting of portfolio and select committees on public enterprises

Transport Sector

  • Rail

    • Rail Safety Bill in process of being enacted (NDOT).

    • Adoption by Government of a restructuring model for Spoornet (NFA sectoral signoff secured 25/2/02).

      • Spoornet to be run as an integrated freight company on an extended rail network.

      • Internal restructuring and efficiency improvements to be implemented.

      • Options for Orex to be reviewed. Inter-departmental process instituted to investigate options base case(DPE, DTI & DME).

      • Shadow incorporation of divisions to be performed – to establish accountability and address cross-subsidisation audit trails and impact.

    • Lux Rail (Blue Train) - Concession currently underway.

    • Integration of Rail Passenger Services in progress


Presentation to the joint meeting of portfolio and select committees on public enterprises

Transport Sector cont…

  • Ports

    • Ports policy was approved by Cabinet and gazetted 2002.

    • Incorporation of National Ports Authority and Port Operations Division.

    • 3 Year tariff reform process started December 2001.

    • Ports restructuring options principles and concession architecture developed to further its multiplier effect role in the economy as well as SADC.

    • An Economic Impact Study will be performed to identify the asset packages

    • The Port Regulator and New Ports Act legislation is currently under development. (NDoT)


Fast tracking concessioning of durban container terminal

Fast tracking concessioning of Durban container terminal

  • Durban port congestion has resulted in the fast tracking of concessions for the Durban container terminal.

  • ITA will be issued in Q1– 2003

  • International (Canadian consortium) consultants to assist the DPE in developing concession architecture and model already at work

  • Expected to provide reports early next year.

  • Labour engagements have been initiated


Presentation to the joint meeting of portfolio and select committees on public enterprises

Energy Sector

ESKOM General

  • Incorporation of Eskom as a company in terms of the Eskom Conversion Act – Act No. 13 of 2001.

  • Generation, Transmission, Distribution to be set up as independent operating divisions.

  • The unregulated businesses, Eskom Enterprises, incorporated as a separate subsidiary

  • Interaction with organised labour is ongoing.

  • 2002 – 2003 Activities

    • Ongoing restructuring of Eskom Enterprises, with emphasis on governance issues and internal rationalisation


Energy sector cont

Energy Sector cont…

  • Commenceprocess for disposal of 10% of Eskom’s capacity with BEE focus. Introduction of 20% for the Private Sector Participation (PSP) stake to commence, subject to the development of an appropriate regulatory framework and market rules being in place;

  • Consultants already engaged to assist in the development of the Market Model and evaluation of the Cluster Model of Eskom.

  • Energy Distribution

    • Co-ordinated by DME – (Work ongoing)


Telkom ipo

Telkom IPO

  • IPO will proceed in the 2002/03 fiscal year

  • Education campaign in progress.

  • No further comment as a result of SEC requirements


Presentation to the joint meeting of portfolio and select committees on public enterprises

Forestry Sector

  • KwaZulu-Natal Transaction

  • 75% stake was sold to Siyaqhubeka Consortium for R100 million.

  • The sale was finalised and assets were transferred on October 1, 2001.

  • 14% will be made available to Black Farmers, 10% has been set aside for Community Trust and 9% was set aside for ESOP.

  • The Community will receive R5,3 million per annum in rentals.


Forestry sector

Forestry Sector

  • Eastern Cape North Transaction

    • Sale and transfer of assets to Singisi Consortium including 168 communities wasconcluded in August 2001.

    • Sale value was R 17 million.

    • An additional 10% was set aside for community trust and 9% for an ESOP.


Presentation to the joint meeting of portfolio and select committees on public enterprises

Forestry Sectorcont…

  • Komatiland Forest Package

    • Currently going out to rebid

  • Western and Southern Cape

    • Land Conversion

      • Process commenced

    • SEP/BEE

      • RFP issued

      • Preferred SEP/BEE to be determined

  • Amatola

    • Transaction negotiations in progress


Presentation to the joint meeting of portfolio and select committees on public enterprises

Mining Sector

  • Alexkor Amendment Act promulgated.

  • Decision taken to dispose of 51% of Alexkor stake to a SEP inclusive of BEE and international marketing exposure to add value.

  • 10% Namaqualand community stake (in Trust) to be set aside.

  • Project Plan for transaction implementation developed.

  • Phase 1 for prequalification of prospectve bidders finalized

  • Phase 2 for the submission of final binding bids in progress

  • Preparatory work complete and evaluation criteria finalized- November 2002

  • SEP transaction should be finalized – February 2003

  • SEP could commence operations shortly thereafter


Presentation to the joint meeting of portfolio and select committees on public enterprises

Hotels and Leisure

  • Cabinet resolved to dispose of all Aventura resorts either in single entities or groups.

  • Disposal of 4 non-strategic resorts concluded, (Aldam and Christiana).

  • Four resorts currently being disposed off:

    • Heidelbergkloof ( to be finalized soon)

    • Kareenkloof (Finalized)

    • Eiland (Finalized)

    • Pretoria(Finalized)

  • Prospectus and adverts for remaining 8 resorts issued Oct 2002 and bids received on 4 October 2002

  • Evaluation process has commenced and expected to complete by end November 2002

  • Disposal of the remaining Aventura resorts by end 2002 /2003 financial year.


Addressing concerns of organized labour

Addressing concerns of Organized Labour

  • Engagement with Organized Labour ongoing within the context of NFA.

  • Different Sector Forums play a critical role in facilitating these processes of engagement.


Thank you

Thank You


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